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Making The Most Of Your Retirement Planning

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Making The Most Of Your Retirement Planning

Discussing the basic fundamentals to assist in planning for retirement

When it comes to planning for the future, retirement appears to be so far into the future. At Milestones, retirement is defined as the occurrence of one of the following three life events: disability, old age or death. Therefore, retirement can occur at any time and when it occurs it requires a guaranteed lifetime income for you and your heirs.

Since retirement requires some measure of financial planning for the future, the earlier you begin to visualize the future the easier it will be to accumulate a meaningful guaranteed lifetime income. So begin to think through this question: (i) what are my sources of guaranteed lifetime income? Most persons have seven main sources of retirement income. Three of which are: state benefits (NIS), employer or individual-sponsored approved retirement savings and personal savings and investments.

Even with these income streams, there are still uncertainties such as whether the income can keep pace with inflation and your desired lifestyle. Most people see NIS as insignificant. Arguably, since you are required by law to be a participant, it should be considered as a foundation benefit plan: combined contributions from you and your employer is less than 10% of your gross taxable income and to a statutory maximum income level; the benefits are based on a formula. It is on this foundation that you build other savings and investments to provide an income of at least 80% to 100% of your actual income at your actual retirement date and an indexation of say 5% or 10% per annum.

Changes in the economy in recent times have seen fewer companies establishing Superannuation Funds (Fund). If you are a participant of a Fund, here's what you must do and know: obtain a copy of the Trust Deed and Rules and read it; make the maximum 10% tax-deductible and tax-deferred contribution; know the benefits payable as a result of disability, old age, death, winding-up and the vesting schedule. The foregoing areas equally apply to Approved Retirement Schemes.

So now that you have the first two sources of retirement income, what are you left with? Finding ways to save and invest more of your current income for retirement. Investing requires knowledge of your risk profile as well as your investment options and diversification to get the best overall return.

Time is your greatest asset, but only if you use it wisely. Start today to plan for the future and your retirement.